Benefit tally 'not an excuse for hard line'

Job-hunters who don't get jobs and go on a benefit as teenagers are expected to cost taxpayers an average of $180,000 over their lifetime. Photo / Christine Cornege

Finance Minister Bill English denies the Government will use a $78 billion valuation of the lifelong cost of benefits as an excuse to get the public to buy into a harder line on welfare.

A valuation found those on benefits last year will cost a total of $78 billion over their lifetimes.

Almost half of that was expected to be on those who were on the domestic purposes or invalids' benefits.

And those who first went on a benefit as teenagers had a much larger expected lifetime cost than others.

The valuation by Australian company Taylor Fry cost about $800,000 and will be repeated annually to track the impact of the Government's welfare reforms.

Sarah Thompson, of Auckland Action Against Poverty, said the study was futile and National was simply trying to scare voters into accepting hard-line policies and get people off benefits whatever the cost.

But Mr English denied the valuation was to provide an excuse to make tougher decisions about welfare - saying the Government would actually be spending more as it tried to get people off long-term benefits.

"Actually, it's an excuse for almost the opposite. It will push Government to invest more upfront. We are putting our money where our mouth is on this - we've already committed several hundred million on the basis of this kind of thinking."

Labour's social development spokeswoman, Jacinda Ardern, questioned the value of the exercise, saying the Government had spent almost $1 million to find out what it already knew: that jobs were needed. She said the Ministry of Social Development already kept information on the numbers on welfare.

Mr English said the valuation was an important "performance tool" and would change the behaviour of the Government by forcing it to confront the long-term issue rather than accepting it was an unavoidable cost.

Chair of the Work and Income Board Paula Rebstock said it was important especially because it would be repeated annually.

"When you take a long-term model, there's no place to hide."

The valuation was recommended as part of the Welfare Working Group's report, which Ms Rebstock led.

Taylor Fry used data from the past 20 years to calculate the likely lifetime cost of those on a benefit in 2011, including administration costs.

Taylor Fry analyst Alan Greenfield said the figures relied on assumptions such as the employment rate and inflation, and small changes in those could significantly alter projections.

But it could be used as a benchmark to track progress over time. He said such a valuation was a world-first for a benefit system, but such valuations were used in the insurance industry and were used by ACC in New Zealand to calculate claimants' lifelong liability.